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tv   Bloomberg West  Bloomberg  February 27, 2014 1:00pm-2:01pm EST

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>> live from pier three in san francisco, welcome to bloomberg west, where we cover innovation, technology, and the future of business. fed chairman janet yellen weighing in on bitcoin, telling the senate banking committee the fed has no authority to regulate the currency. this has protesters set up shop outside of mount stocks. -- mt. gox. kept one cityuber
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off the road when demand was expected to bring in more money. lead. our google has built his empire by selling ads on its search engine. now, the company is not change in mo -- it's a mobile maps and driverless cars. one of the newest essences is global -- google fiber. today, we are taking an in-depth look at google fiber. the only other place other than kansas city -- tell us why google picked provo. >> a lovely town, a college town, a beautiful mountain. it is left over from boom. when the city actually borrowed over $30 million to wire houses without optical networks.
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it required a significant update they could not afford. they went to google and said, you're trying -- starting to roll this thing out over the country. you have got to start. it is a partner with google and google is now rolling out new equipment to run existing fiber lines and create to go fiber here. class google fiber is a -- an attempt to jumpstart to impressive meets. megabitsber is 1000 per second. it is 100 times faster. you go bit, google fiber threatens to up band the cougar -- google fiber business. -- at&t'ser than att experimental service. google fiber started in kansas city in 2012.
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and comingn utah soon, austin, texas. it wants to bring the service to 34 more cities. optical networking signals to break into each customer's home. it will cost google as much as $900 purse out -- per household. if google build it, will customers come? analysts think as many as 20 million customers and 50 million at&t customers will come, giving google fiber nearly as big a customer base of comcast. plan could expansion threaten -- in austin, the plans have really been slowed down. up bynnot run your fiber telephone poles and we were here first.
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>> it is really interesting. when we are talking about the potential comcast time warner merger and thinking about what competition,r comcast increases the speed they are giving internet services to customers. they lowered their cost just in the month. the competitive atmosphere is keenly being felt not just by comcast but also by at&t and verizon. directv dish, we talked to people in the diner this morning saying they are getting from all these companies who recognize the consumer here is suddenly in play. it is hard to compete. if -- they have already paid for the data usage so it is a clever use of skill sets and unused capacity.
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>> and comcast's service cap stout at 20 megabits or somewhere like that. >> it depends on what services they are offering. gigabits,at they call and in other words, they are all .xaggerating how fast , theynd of investment have not shown a willingness to do. >> i want to bring in jon erlichman from l.a. and our bloomberg industries analyst in new york. paul, i will start with you. it is an uphill battle for google to really expand.
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how does that play out as a business for google? >> i think it is more of an experimental business at this point for google. it is certainly not going to supplant their core search businesses as you mentioned at the top. google clearly brings a lot to the table in terms of technology and capital. it could be tens of billions of dollars to wire up the conch -- the company to fire -- fiber off to cables. do they want to do that? we do not know. enter 34 potentially additional markets. it becomes a very serious competitor to many cable companies and telephone companies out there who really do depend on broadband as the old part of their business. >> at the same time, rapid changes happening in the cable broadband industry. comcast is now merging with time warner. regulatorycertain issues. people say that could slow down the innovation of the internet and keep speeds slow.
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>> behind closed doors, will that hurt the innovation story? from google's perspective, you put heat on traditional cable players. no doubt about it. whether it is to provides that -- faster speeds, which is ultimately good for google's business, or keep them on their toes for other stuff, like the fact you have got run -- broadband players who want to charge this neutrality issue, to places like netflix for how much of those services are coming down there price, google is coming down your pipe all the time. result, there is pressure google might have to pay more to broadband players as a part of that. if you build your own network, you're pushing the ball back into the court. a lot of strategy here.
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>> google, some cities across country are trying to get google to come to them. cities, including where google is based, right here in silicon valley, have said, this will not work in mountain view. how does google overcome those kinds of challenges? google is not laying ip are. they have already got it. they have already got it in their homes here. they do not have to do all of their work. they have been very selective about how things are working. kansas city had to give up a lot to google in order to do this. salariesed workers and of employees in the city dedicated to rollout of fiber. they had an expedited process. they used city infrastructure to get these things up. google is selecting places where they can get the rollout in a simple way. serviceay the customer numbers for google have been very strong. time warner cable is the only
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company worse than comcast when some studies have been done on customer service. google fiber has done quite well in the margins they have been in. i think they will be selected in the markets they go into. where they can make a difference and also get it done quickly. if they do 34 cities, you will look at a substantial business where they have got nearly as many customers potentially as comcast, albie it not the biggest cities in america. reviews onading yelp google fiber in kansas city and they're mostly five stars. what about the regulatory issues here? so much going on with net neutrality. the fcc could make a ruling and change everything, change the entire landscape. what direction do you think the fcc will go? >> the rollout of google fiber here and they do expanded to 34 additional cities, that will be viewed very carefully by folks
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in washington, particularly as it relates to the pending comcast time warner cable bill. comcast is arguing, even though we are the number one and number two cable operator, we operate in a very competitive not only television business but a broadband business as well. comcast can point to the googles of the world as a new competitor in the marketplace, perhaps making it easier to get the deal approved. >> what is the view of the media on this? >> traditional media companies love this. they have a cliché of content is king and they can roll that out when you have got something like google fiber. think about a company like disney. they can say, great. if you get paid by traditional cable players and satellite players, now we can get paid through google fiber. because google fiber does not have the scale just yet, maybe they will end up in tons of cities, but because they have less, despite being a big
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company, they end up paying higher rates to media companies like disney than what the traditional cable players are doing. companies like disney are in a good position to say, you want to offer monday night football or do you want to have google fiber and not be offering those customers monday night football? they generally see it as a good thing. >> all right. our senior west coast correspondent. cory, we will get back to you later in the show. we will have much more coverage on google fiber and how it is a receiver there. so what are services like netflix and xbox like with google fiber? we touched on that there. we will dig in deeper coming up. ♪
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>> it has been a bumpy week for bitcoin. the exchange has gone bust. today, janet yellen testified
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before the senate banking committee and was asked about the digital currency. take a look at what she had to say. have authority with respect to bitcoin. it certainly would be to askiate for congress questions about what the right legal structure would be for virtual currencies that involved nontraditional players. >> this as a protester confronted the ceo outside company headquarters in tokyo. what does this all mean? for the future of bitcoin? our ceo joins me now in the studio. first of all, you used to broker big bitcoin trades. but you do not do that anymore. >> i do not. i cannot bank. i had thousands of accredited investors want to put in the bank than just saw bitcoin is too big of a risk, a little too early. >> my question is, is it too early? is all the uncertainty
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around bitcoin right now, could this mean the beginning of the end of the digital currency? >> i do not think so. things have changed in the last few months. you look at yellen's is responsiveness, she is saying she had the regulations she needed. hadrobably would not have this problem if it was audited and whatnot. --ng forward, >> the price is going down. >> overall, this will be a net positive. been hacked numerous times and caused a lot of problems. the biggest scare was mostly caused by them blaming the bitcoin protocol and transaction nobility. if we could move on without mt. gox, we will see better exchanges pop up. it will obviously be must --
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much better run. >> so many bitcoins were stolen. anycan people have confidence in any bitcoin exchange echo >> you look at the people running it. over these years, mark has not been transparent at all. everybody was asking questions and not getting answers. people were waiting months to get documents verified. it is been run by a professional new york exchange, and you can expect higher product -- higher-quality products. >> the most prominent bitcoin exchange of all time, who's behind it? >> a french guy. prominent,it was so it was essentially the first exchange and started way back in 2010. it basically had first mover advantage and says liquidity begets liquidity and if you wanted to do large trades, it had to go there. those days are over. >> one of the biggest challenge -- what are the biggest challenges bitcoin faces?
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>> adoption and regulatory approval. getting banks on board. that is changing. wey have come out and said, have got this figured out. >> what about all the people who have not gotten their money back and probably will not? >> it is a great learning experience. a free market, early. shows you there are better ways to store your bitcoin. on mt. gox, you can use a wallet to store bitcoins on paper. only chess someone with your keys and your money as much as you have to. >> where do you see bitcoin going from this point? crisis will bring more adoption. class i would bring more adoption if the price is dropping. >> and will bring awareness to more people and bring serious players into it. people see it as a business opportunity. if other people were not screwing it up, you would not see guys entering the space. bitcoinbviously had a
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experienced before. are you going to jump back and? class i may. i will wait longer and see how these other guys do. it is a business opportunity for somebody. >> what is the best opportunity? >> anything. it is the early days of internet. anything you threw up in -- on the internet stock back then. the field is wide open. >> all right. we will watch to see if you're right. thank you for joining us. allegations uber may be keeping drivers off the road on purpose to boost search pricing. is it actually wrong what they are doing? we will take every -- a look at the economics next. ♪
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>> look him back. the man in charge of new construction is j, president of related hudson yards. he is one of the speakers at this year's lumber business design conference on march 10. we spoke to him about his plan. ♪ >> a new lively neighborhood that provides for people to promote their work and -- and play in a new way. my role is to basically be the maestro. have a lot of skilled
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technicians and multiple buildings going on at one time and looking at artists and engineers are in my job is to ensure we are producing music. partn is a very important of how we envision it. not very option do we have to -- this opportunity. we are building our own streets and our own sidewalks there at there was a requirement that half of the plane had to be open in the sky. very unusual. nature -- twice as big, that you might think is normal for normal in -- development. we did not fully appreciate how big they are. one challenge is the sheer man attuned of construction. billions of dollars of construction on the way.
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secondly -- secondly, it requires a lot of money. there are not many banks making $500 loans. the third challenge is making sure we really create a great sense of place. i have always wanted to do a big commercial and velma in new york city. i do not think you could get any bigger than this one. the phrase all my life has been a preparation for this moment, we will see how i pull this off. getting here was the long haul. >> that was the president of related hudson yards. for tickets and more information, just go to bloomberg businessweek google, we will have more on that in our in-depth look at google fiber next. ♪
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>> it is 26 minutes past the hour, which ms. bloomer television is on the markets. -- stocks are rising for the fifth straight day above its record high close. can it stay and close at 1849? it also comes as janet yellen gives testimony in washington saying the fed may change the trajectory. they could possibly delayed if the economy weakens. individual movers we're watching. dan is putting pressure proposing three on the board, including himself. his 9.5% stake -- he says current director, fresh perspective. we are watching shares of a it came in higher
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than analyst estimates. we know he has seen success with his new loyalty program. that is it. more bloomberg west is coming up after the break.
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sizes hi
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>> to help the company meet profit goals and adapt. workers in vermont, new york, and minnesota, were among those let go. china's largest internet search and -- engine. from a yearse earlier.
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the spending is curbing earnings growth. google can now add the polar bear capital of the world to its mapping. polarmpany teamed up with bear international to chart the frozen tundra. and specially adapted be -- vehicle, the goal to bring attention. did not know there was such a place. we're taking an in-depth look at google fiber. cory johnson is back with us. there.e with the mayor
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>> there are publicly traded companies there and three companies and billions of dollars in funding in the last 18 months here. >> wended the effort began. class i can't to this 4.5 years ago. paper did an editorial and called the fiber network a milestone around our necks. that was the beginning for me a figuring out what we do with the network built that we were not quite sure what we found. citiese are a lot of that have government paid for fiber networks that should be providing internet and are not. >> correct. we did not actually sold our network. the company we sold it to, just
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like we sold at two, he was unable to as well. >> what was the problem? >> the biggest problem was the gap between what it costs and the revenues that have come in. pretty big. >> you have the problem come it was not making money, how does google enter? >> we started looking for a buyer. we looked high and low and spoke with consultants and see who would come in and by the network were run the network. when we started talking to google, all of this was very exciting about the prospects and we were hoping to put it together. probably the most immediate impact is just the buzz. everybody is excited. i am moving my business, i want to come in, i want to be there. almost every discussion ends
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with a conversation about google. it is incredible. actual application, it is a city that loves technology and loves startups. the perfect match for google and the speed for every home, it seems to be a perfect match. schools are getting excited about it. what does it mean to have every .ome and fiber around the home >> do you feel like you had to give up? what if you had -- what have you had to give up to google to make it happen? >> read article fiber into the ground. we gave them that fiber. fareturn, what they gave us outweighs it. it is not even close. free internets. the work abuse to cost the city $1000 to work it up. bringing all they brought into
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it, not even close, the connection for what we had to do. >> what did it cost for the fiber? >> $39 million. that was about 10 years ago. we were to a point where really the only thing -- half of that costs was the fiber and half was switches. about 20 million of that had to be replaced. the city was going to have to do that because google came along and said of us. put a number on exactly what that is except a large amount of money. they also connected the remaining two thirds of the home and our houses. they do that at no charge. if you want five megabytes, which is small, but it is enough to watch netflix and stuff like that, and if you want the gig,
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that is $70, and if you want the tv, another $70. >> it sounds like a pretty big deal. what about google? google is experimenting with a lot of different businesses like this one. >> yes. it really aligns with a lot of their strengths. , they had atwork sense of their own internet act on for much of the country. once they own that, sending files around the town, sending e-mails back and forth, it essentially cost them nothing. to get to geek out, but essentially, google has an arrangement with the owners of networks,pieces of where they're buying capacity for biggest is ever. a lot of the time, because they're buying -- vying for the peak moment, they have unused capacity. this gives a chance to use the unused capacity with what they
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are ready buying for youtube and other things in a way that few of the companies could possibly do. maybe apple and maybe amazon and maybe that is the list. >> interesting. i wonder if apple and amazon will respond in any way given going into is uncharted territory here. book,er wrote a wonderful one up on wall street. he spoke about one of the reasons when he was running from the fund was he thought the worst vocation, were companies would just expand corollary businesses because they were there. but this seems to be near the core of what google does. i can see why this makes sense in their business plan underground, as well as relationships of their services. >> all right. cory johnson taking an in-depth look at google today. thank you so much. want buber off the
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road. could it be keeping an zone riders off the road as well? we will have more on the way companies will boost search prices next. ♪
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>> welcome back. is uber keeping its drivers off the road intentionally? the verge reported recently uber texan saying it would not to play extra drivers. google confirmed the text was detected. it wanted to reward new drivers with a strong holiday paycheck. we have reached out and have not gotten a response. it comes at cities like seattle
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are weighing uber's shut down because of possible safety concerns. i want to bring in the author of the one percent windfall, and also the founder of a profit company that helps businesses set pricing strategies. he joins me now from boston. first of all, is uber doing anything wrong by not putting any extra drivers on the road? >> it was very deceptive. it always explained its pricing as he creating demand with supply and what they actually did was restrict supply. the example really goes to one of uber's key challenges for the there and terms of what role of price was in its brand. is uber a low-cost leader or a market maker? or is it like most companies charging what the market will bear? >> is it wrong to hike prices at times where they could get more? they are more expensive at peak times. >> absolutely not. you think about how flights are
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more expensive at the beginning of the lawnmower seat, lawnmowers are more expensive than the end of the season. --is a very common tactic tactic and the noted -- the notion of opportunistic pricing is part of our capitalist system. >> what you think uber should do with its pricing policy? should they keep it as is? are the changes they should make? >> uber needs to come out and define them clearly tell its consumers what it stands for in terms of pricing. it should think charge what the market takes will bear and should take a note from the musician, kid rock. out summer, kid rock came and set all of my seats will be $20 except for the best 1000 seats. i will raise prices as high as $350 for those. this pricing strategy was a smash hit. it sold a lot of tickets. most important way, consumers were very happy with it and viewed it as fair. when you think about what uber
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is doing, 90% of the time, uber is charging the normal rate, 30%h at least in boston is below what taxes are. during 10% of the time, they are charging server -- search prices. uber needs to come out and say, we have got a great service. you use it and i certainly do. it is a great service. most of the time, it will be very cheap. sometimes, it is part of our business model where we will raised rices. if you cannot during that time, we understand that and you -- we hope you forgive us. come back when prices are low. that is a reasonable pricing strategy. >> i use uber. one of the things you suggest i found interesting is you think uber should consider raising prices during off-peak time, like raising the cheapest price. tell me more. >> the question is certainly, here in boston, the problem is in the current system during
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cream get a lot of drivers sitting on the sideline and the minute it looks go, you will get these drivers to come in and that opportunistic -- uber really needs to focus on making drivers 90% of the time are driving at the regular price, it is a possible endeavor for them. i could be raising price or seeing the drivers, look, much like when they are a waiter or waitress, work the bad shifts because we will cover you during the good shifts. it would means restricting supply during the good times. >> how is this all impacting uber's brand? it is one of the most controversial companies out there. they're not putting extra drivers on the road. doesn't that undermine the whole idea that they are simply following the laws of supply and demand? if they are manipulating the supply, does that not make the situation very different? crisesainly, the pricing
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uber has had over the last month and have to two months, it has really damaged his brand. during peakant times, it is ok to limit capacity and make a higher profit. it goes back to demand economics 101. you do not always charge lowest price. there are sometimes when for-profit companies decide to charge a higher price knowing they would restrict them out of quantity. i do not think there is anything wrong with that. it is part of economics 101 and how the market works. >> what do you think of this idea? what about it tee times like a hurricane? a really bad snowstorm? it -- they take less than that 20% in order to charge consumers less. in situations, times of great need. >> my question would be why. it is a for-profit company. you do not see hotels during
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peak times donating part of their money to charity. have that social responsibility? what is so distinctive about uber that you would suggest they do that? take on some of the safety? there are cities like seattle contemplating this. there was a girl killed by uber drivers like san francisco. their mother says she could see the light from the app shining onto the drivers face. shanghai reportedly just banned taxi apps during rush hour. for safety reasons. they do not want drivers on their phones or looking at their phones. what do you think of the safety issues as a challenge? how big of a challenge will it be? definitely, as uber and car sharing services as a whole become a big part of the transportation picture, you will see regulation. one of the things that shocked
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me was to find out uber's insurance, liability insurance, it is $1 million per. much in drive that boston. i have more coverage than uber has four commercial driving. that was a little surprising. the horizon. on not gone away. author of the one percent. thank you so much. interesting to hear your perspective on what uber should and should not do. coming up, we go inside the home of one of the first customers. ♪
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>> welcome back. jeff bezos made headlines. it seems netflix is not letting that's -- amazon have all the fun. the company released a parity video showing netflix is either getting the dvds by drone anytime, anywhere. a video post fun at the idea, saying, unlike other ideas -- companies come we have literally spent days working out all the bugs. our look get back at at google fiber right now. high-speed internet is important but how much bandwidth does this one person really need. cory johnson tracked down one of the first users of google fiber in utah. i'm so curious how much better google fiber really is. does it feel 100 times faster? >> yes. and i have not use yet. i always know the right number of bandwidth is the right number of money. more is the right number. we talked to a guy who was one , and we askedsers
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him about his experience. check it out. >> i got google fiber two lisa go. the main way we describe google fiber is between dial-up and dsl. it washe tv plan and $141 a month and i do not have to pay any installation fees. when it comes to gaming, especially on the xbox, connecting to fans and joining into parties is pretty much instantaneous now. one of the things i wish google had was more activity. tablet, i can see my entire guide from the normal station. if i want to pull up something say an old episode of "supernatural," i just hit play. let me cfs something loads. thing i do not like
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about google fiber right now is how much i spent on the couch watching tv. a little jealous watching that. what would it take to get google fiber at a major metropolitan area like san francisco? >> i saw bill gates even speech once. there was a new technology called dsl. he said, moore's laws works for semiconductors but not for bulldozers. superfast broadband will be a lot slower than the ability to consume and create data. that is the issue, fundamentally. it will be an expensive thing that will take companies with very deep pockets access to capital and a willingness to label fiber. >> all right here and we will be watching. it is time for the bwest byte, one number that tells a whole lot. with us from l.a.. cori, you got the bite today.
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19. if the time warner comcast merger goes through, time warner comcast will control 19 of the 20 largest data markets in the united states. a number a lot will google fiber is one of the few efforts that might create competition in the marketplace. that is perhaps why google will not want a lot of attention. i do not know if they want the merger to go through. >> i have seen reports comcast -- for a warner decade, we will not see much in comcast and time warner. what do you make of that number? >> it gets directly to a cory has been talking about. affect you have got the google wildcard to keep all the cable companies on it. i think cable companies have been somewhat skeptical on the
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nationwide rollout of google fiber. they see it in small markets and do not necessarily see it in markets like new york city. but it is true that could be the one threat for those players going forward. >> cory? >> yes. john is right. got kansashe has city. we are about to -- google says the nasdaq34 more to recently. i can make a big change. we will see where they end up doing those things. we know salt lake city as well as a few other cities. why would comcast spend the money to upgrade their service and spent all capital expenditures to do that? will be there throughout the day. our senior west coast correspondent, thank you and thank you all for watching this edition of the show. we will see you back here tomorrow. ♪
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>> from bloomberg world headquarters in new york, i'm mark rumford -- i'm mark crumpton. this is "bottom line." today, janet yellen discusses the state of the u.s. economy. in the ukraine's fugitive president will reportedly hold a news conference in russia. the fda proposes changes to nutrition labels on food packaging. to our viewers in the united states and those of you joining us from around the world, welcome. we have full coverage of the stocks and stories


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